Ownership and wages: spatial econometric approach

The aim of our paper is to disentangle the relationship between ownership and wages using cross–section data for Slovenian medium size and large companies, where we account for spatial dependencies in wage determination. Space here is not considered in geographical context, but as a set of relations between firms originating from the same owner. Using a detailed database on Slovenian ownership, we apply a spatial econometric approach to detect any ownership–based wage spillovers, while accounting for different standard factors, such as size, capital intensity and productivity, and also some ownership–based variables, such as ownership concentration and ratio of cash–flow to control rights. Our results indicate that ownership is an important factor in explaining differences in wage levels. Many large owners divert cash–flow into their own pockets which has a detrimental effect on wages and indicates that this behaviour induced by owners is not sustainable.